With Bitcoins and Argentinian hyperinflation in the news, it seems like an apt time to discuss what currency actually is. In a novel way Benje Patterson discusses this with regards to Air New Zealand’s airponts program – and given this he tries to figure out how exactly this program should be valued (Infometrics link)!
Airpoints Dollars conform to the standard definition of a currency – they are a medium of exchange for goods and services, they can be used to store value through time, and they are a quotable unit of account. Air New Zealand operates a fixed exchange rate policy for its currency, where one Airpoints Dollar can be redeemed for one New Zealand dollar worth of flights.
Furthermore, in addition to being a currency, the Airpoints Dollar loyalty scheme also adds to Air New Zealand’s bottom line. Air New Zealand is the sole institution with the ultimate authority to issue the Airpoints Dollar currency and back-of-the-envelope calculations show that the value of the airline’s loyalty scheme could be around $400 million.